To apply CVP analysis in not-for profit organization ________.
A) managers need to focus on the customer base rather than the cost drivers
B) managers need to focus on measuring their output, which is the same as tangible units sold by manufacturing and merchandising companies
C) managers need to focus on measuring their input, which is different from the tangible units consumed by manufacturing and merchandising companies
D) managers need to focus on measuring their output, which is different from the tangible units sold by manufacturing and merchandising companies

Question

Quizplus · Accepted Answer

Not-for-profit organizations do not sell tangible products, so they cannot measure their output in tangible units like manufacturing and merchandising companies. However, they can measure their output in terms of services provided or activities performed. Therefore, managers of not-for-profit organizations need to focus on measuring their output, which is different from the tangible units sold by manufacturing and merchandising companies. CVP analysis can still be used in not-for-profit organizations by using the concept of contribution margin, which is the difference between total revenue and total variable costs.

To Apply CVP Analysis in Not-For Profit Organization ________